17th Jun 2019 07:26
(Alliance News) - Construction firm Kier Group PLC on Monday suspended dividend payments and earmarked several business for disposal as it looks to get its balance sheet under control.
FTSE 250 Kier has put up Kier Living, its housebuilding business, for sale, saying despite being a strong business it would require significant funding to keep growing. So far there have been "a number" of expressions of interest.
Kier Property has also been put up for sale, with the investment required likewise "incompatible" with Kier's capital requirements, and Kier also will be quitting the Management and Environmental Services businesses.
Kier has suspended dividend payments for its year ending June, and the following financial year. At the interim stage, Kier slashed its first half dividend 79% to 4.9 pence a share.
Chief Executive Andrew Davies said: "Kier has a number of high-quality, market-leading businesses, in particular Regional Building, Infrastructure, Utilities, and Highways. I believe these businesses will deliver long-term, sustainable revenues and margins and are inherently cash generative."
"As previously announced, I have been leading a strategic review which has resulted in the actions being announced today," Davies continued.
"These actions are focused on resetting the operational structure of Kier, simplifying the portfolio, and emphasising cash generation in order to structurally reduce debt. By making these changes, we will reinforce the foundations from which our core activities can flourish in the future, to the benefit of all of our stakeholders."
The business sales and dividend suspension are expected by Kier to lead to a "material reduction" in overall debt, and the focus going ahead will be on Regional Building, Infrastructure, Utilities, and Highways.
Kier has overall debt facilities of GBP920 million, with bank debt not maturing until June 2022, and most private placement debt maturing between 2021 and 2024.
The company said some "recent commentary" has hurt confidence in the business, but it is still able to absorb this. However, net debt at June 30 will be higher than market expectations as a result.
The proposed sale of the businesses comes after the Times reported last Friday the housebuilding business could fetch up to GBP150 million. Earlier in June, Kier issued a profit warning, saying adjusted operating profit for its year ending June will be lower than expected due to volume pressures in three units: Highways, Utilities, and Housing Maintenance.
Adjusted operating profit in Kier's year ended June 2018 was GBP160 million.
Kier's shares closed at 130.80 pence each on Friday, having sunk 59% in the past month.
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